Management's Discussion and Analysis of Financial ... - Wal-Mart

More documents

Recommendations

Info

Management’s Discussion and Analysis of FinancialCondition and Results of OperationsWalmart U.S. net sales were relatively flat for fiscal 2011 compared to fiscal2010 as growth in retail square feet was offset by a decline in comparablestore sales of 1.5 percent as a result of slower customer traffic. The netsales growth in fiscal 2010 resulted from an increase in customer trafficand strength in our grocery and health and wellness categories, as wellas our continued expansion activities.Gross profit margin was relatively flat for fiscal 2011 as compared to fiscal2010. In fiscal 2010, gross profit margin increased 0.7 percentage pointscompared to the prior year due to enhanced merchandising strategiesand lower inventory shrinkage.Operating expenses, as a percentage of net sales, decreased by 0.3 percentagepoints in fiscal 2011 compared to fiscal 2010 due to expense leveragingprincipally related to improved labor productivity and a reduction inincentive plan expenses. Operating expenses, as a percentage of net sales,increased by 0.4 percentage points in fiscal 2010 compared to the prior yeardue to a smaller increase in net sales as compared to the prior year, higherhealth benefit costs, higher advertising expenses and a pre-tax charge of$73 million relating to the restructuring of Walmart U.S. operations.As a result of the factors discussed above, operating income was$19.9 billion, $19.3 billion and $18.3 billion for fiscal 2011, 2010 and 2009,respectively.Walmart International SegmentFiscal Years Ended January 31,2011 2010 2009Net Sales (1) $109,232 $97,407 $96,141Percentage change fromcomparable period 12.1% 1.3% 6.2%Operating income (1) $ 5,606 $ 4,901 $ 4,832Operating income asa percentage of net sales 5.1% 5.0% 5.0%Unit counts 4,557 4,099 3,595Retail square feet (2) 286,680 265,846 244,802(1)Dollar amounts in millions(2)Amounts in thousandsWalmart Internationalunit counts3,5954,0994,557FY09 FY10 FY11Net sales for the Walmart International segment increased 12.1% and 1.3%in fiscal 2011 and 2010, respectively. Fluctuations in foreign exchange ratesprovided a favorable impact of $4.5 billion in fiscal 2011. The remainingfiscal 2011 increase in net sales is primarily due to our markets growingconstant currency sales over last year, as overall retail square feet increased7.8% during the year. Brazil, China and Mexico contributed some of thehighest sales increases to Walmart International’s net sales growth in fiscal2011. The fiscal 2010 increase in the Walmart International segment’s netsales primarily resulted from our expansion activities and the inclusion ofthe results of D&S, acquired in January 2009, offset by the unfavorableimpact of changes in currency exchange rates of $9.8 billion. For additionalinformation regarding our acquisitions, refer to Note 15 of the “Notes toConsolidated Financial Statements.” Volatility in currency exchange ratesmay continue to impact the Walmart International segment’s net sales inthe future.Gross profit margin was relatively flat in fiscal 2011 as compared to fiscal2010. In fiscal 2010, the Walmart International segment’s gross profit marginincreased 0.2 percentage points compared to the prior year. The increasewas primarily driven by currency exchange rate fluctuations and theinclusion of D&S, which was acquired in January 2009.Operating expenses, as a percentage of net sales, decreased 0.3 percentagepoints in fiscal 2011 compared to fiscal 2010 due to effective expensemanagement in Japan and the United Kingdom. Operating expenses, asa percentage of net sales, increased 0.3 percentage points in fiscal 2010compared to the prior year primarily as a result of the inclusion of D&S,which was acquired in January 2009.Currency exchange rate fluctuations increased operating income by$231 million in fiscal 2011 and reduced operating income by $540 millionin fiscal 2010. Volatility in currency exchange rates may continue to impactthe Walmart International segment’s operating results in the future.As a result of the factors discussed above, operating income was $5.6 billion,$4.9 billion and $4.8 billion for fiscal 2011, 2010 and 2009, respectively.Sam’s Club SegmentFiscal Years Ended January 31,2011 2010 2009Net Sales (1) $49,459 $47,806 $47,976Percentage change fromcomparable period 3.5% -0.4% 8.2%Calendar comparable club sales (2) 3.9% -1.4% 4.9%Operating income (1) $ 1,711 $ 1,515 $ 1,649Operating income asa percentage of net sales 3.5% 3.2% 3.4%Unit counts 609 605 611Retail square feet (3) 81,202 80,539 80,986(1)Dollar amounts in millions(2)Includes fuel sales, which impacted our comparable club sales by 2.0%, (2.1% )and 1.2%, respectively, in fiscal 2011, 2010 and 2009(3)Amounts in thousands22 Walmart 2011 Annual Report
Management’s Discussion and Analysis of FinancialCondition and Results of OperationsNet sales for the Sam’s Club segment increased 3.5% and decreased 0.4%for fiscal 2011 and 2010, respectively. The fiscal 2011 growth in net sales isprimarily due to the increase in average ticket and member traffic. Averageticket increased at a faster rate than net sales. In addition, fuel sales, drivenby higher fuel prices and gallons sold, positively impacted comparableclub sales by 2.0 percentage points in fiscal 2011. The fiscal 2010 decreasein net sales primarily resulted from the decline in comparable club salesdue to the negative impact of 2.1 percentage points from lower fuelprices when compared to the previous fiscal year, partially offset by salesincreases in fresh food, consumables and certain health and wellnesscategories. Volatility in fuel prices may continue to impact the net salesand operating income of the Sam’s Club segment in the future.Gross profit margin was relatively flat for fiscal 2011 compared to fiscal2010. Gross profit margin increased 0.6 percentage points during fiscal2010 compared to the prior year due to continued strength in sales ofconsumables, fresh food and other food-related categories.Operating expenses, as a percentage of net sales, decreased approximately0.5 percentage points in fiscal 2011 compared to fiscal 2010 and increased0.8 percentage points in fiscal 2010 compared to fiscal 2009 primarily dueto the $174 million pre-tax charge related to the restructuring of Sam’sClub operations, including the closure of 10 clubs, incurred during thefourth quarter of fiscal 2010.Membership and other income, as a percentage of net sales, decreasedslightly in fiscal 2011 when compared to fiscal 2010 and decreased slightlyfor fiscal 2010 when compared to fiscal 2009. The decrease in both yearswas driven by decreases in other income.As a result of the factors discussed above, operating income was $1.7 billion,$1.5 billion and $1.6 billion for fiscal 2011, 2010 and 2009, respectively.611Sam’s Clubunit counts605609FY09 FY10 FY11Liquidity and Capital ResourcesCash flows provided by operating activities have historically supplied uswith a significant source of liquidity. We use these cash flows, supplementedwith long-term debt and short-term borrowings, to fund our operationsand global expansion activities. Generally, some or all of the remainingfree cash flow, if any, funds all or part of the dividends on our commonstock and share repurchases.Fiscal Years Ended January 31,(Amounts in millions) 2011 2010 2009Net cash provided byoperating activities $ 23,643 $ 26,249 $ 23,147Payments for propertyand equipment (12,699) (12,184) (11,499)Free cash flow $ 10,944 $ 14,065 $ 11,648Net cash used ininvesting activities $(12,193) $(11,620) $(10,742)Net cash used infinancing activities $(12,028) $(14,191) $ (9,918)Cash Flows from Operating ActivitiesCash flows provided by operating activities were $23.6 billion, $26.2 billionand $23.1 billion for fiscal years ended January 31, 2011, 2010 and 2009,respectively. The fiscal 2011 decrease in cash flow from operating activitieswas primarily the result of our increased investments in inventories,partially offset by an increase in accounts payable. The fiscal 2010 increasein cash flows provided by operating activities was primarily attributableto an increase in income from continuing operations and relatively lowinventory levels at January 31, 2010.Cash Equivalents and Working CapitalCash and cash equivalents were $7.4 billion and $7.9 billion at January 31,2011 and 2010, respectively. Our working capital deficits were $6.6 billionand $7.5 billion at January 31, 2011 and 2010, respectively. We generallyoperate with a working capital deficit due to our efficient use of cash infunding operations and in providing returns to our shareholders in theform of stock repurchases and the payment of dividends.Cash Flows from Investing ActivitiesCash flows from investing activities generally consist of payments for propertyand equipment, which were $12.7 billion, $12.2 billion and $11.5 billionduring fiscal 2011, 2010 and 2009, respectively. These capital expendituresprimarily relate to new store growth, as well as remodeling costs for existingstores. We expect capital expenditures for fiscal 2012 to range between$12.5 billion and $13.5 billion, excluding any business acquisitions.Walmart 2011 Annual Report 23
Page 1 and 2: A Walmart 2011 Annual ReportBuildin
Page 3 and 4: Michael T. DukePresident and Chief
Page 5 and 6: With customers adopting technology
Page 7 and 8: Leveraging our foundation toreach e
Page 9 and 10: Net sales increased 12.1 percent ov
Page 11: Delivering growth throughSavings Ma
Page 14 and 15: Board members pictured, left to rig
Page 16 and 17: Executive OfficersEduardo Castro-Wr
Page 18 and 19: Management’s Discussion and Analy
Page 32 and 33: Consolidated Statements of IncomeFi
Page 34 and 35: Consolidated Statements of Sharehol
Page 36 and 37: Notes to Consolidated Financial Sta
Page 56 and 57: Report of Independent Registered Pu
Page 58 and 59: Management’s Report to Our Shareh
Page 60 and 61: Corporate and Stock InformationCorp
Page 62: Every week around the world, our 2.

Management's Discussion and Analysis of Financial ... - Wal-Mart

Create successful ePaper yourself

Delete template?

Save as template?